BIMCO: Coal Shippers Not Cashing In on Import Surge in China

Dry bulk shipowners are not feeling the positive impacts of a surge in China’s coal imports due to a change in the coal trade patterns which brought around shorter sailing distances influenced by the proximity of exporters, according to international shipping association BIMCO.

The high level of coal imports in China for the third quarter of 2016 shows the growing importance of Chinese coal imports for the shipping market, since mid-April 2016.

In mid-April China enforced a policy of 276 working days per year upon the coal mines, representing a decrease in operational days of 16%. This policy is the dominant reason for the surge in Chinese coal imports to the highest quarterly level since the second quarter of 2014 and the second highest third quarter ever, only beaten by 2013.

“After dropping in 2015, the commodity trades into China are now showing great support to the dry bulk shipping industry. The coal imports are achieving levels as before in 2015 and together with the highest level of imported iron ore, which is the most influential dry bulk trade, China is keeping the wheels rolling in terms of shipped volumes,” BIMCO’s Chief Shipping Analyst Peter Sand said.

Since 2014, there has been a change in the coal trade patterns where China has singled out Australia and Indonesia as its key distributors and focused increasingly on them. Hence, Australia and Indonesia are growing their market share at the expense of longer haul exporters like the US and South Africa.

In the third quarter of 2016 the Chinese seaborne coal imports achieved the highest tonne-miles since the fourth quarter of 2014, with the main drivers being Australia and Indonesia. Unfortunately for the tonne-miles in the dry bulk shipping industry, Indonesia has absorbed 80% of the additional sheer seaborne volume in the third quarter of 2016, mainly driven by a 29% increase in their lignite export compared to the same quarter last year.

“In 2013 China’s coal imports achieved high tonne-miles for the dry bulk shipping industry, due to China sourcing 23% of its seaborne coal volumes from origins other than Australia and Indonesia; primarily long haul routes from the eastern part of the US and South Africa,” Sand added.

These trade patterns have since changed to only sourcing 16% from other origins instead of Australia and Indonesia in 2016. The origins have also changed to primarily shorter hauls from the western part of Canada and Malaysia and not importing any significant amount from the US and South Africa, since October 2014.

BIMCO said that the change in the coal trade patterns has seen the US and South Africa as the biggest losers. Both experiencing their export to China plummet since the third quarter of 2014.

The shipping association added that the thermal coal is the main driver of the surge in seaborne imports, as it amounts to 80% of the imported seaborne volume. It increased 16.7% for the first nine months of 2016 compared to the same period in 2015. Respectively, the coking coal imports increased 4.5% in the same period.